But these are just a handful of the almost endless list of circumstances in which a non-disclosure agreement may not be enforceable. Since the Waksdale decision, his reasoning has generally been applied to invalidate effective termination clauses that do not comply with the ESA. However, in Henderson v. Slavkin, 2022 ONSC 2964, the Court found that the actual termination clause complied with the ESA, but that the confidentiality and conflict of interest clauses were unenforceable because they were not compliant. As a result, the court concluded that all the provisions of the employment contract relating to the dismissal were invalid and that the employee had been unfairly dismissed. Henderson vs. Slavkin points out how the principle is applied in Waksdale. Courts do not hesitate to enforce NDAs (as opposed to, for example, non-compete obligations). The public interest in enforcing confidentiality agreements is for society to improve when companies can engage in trade and innovation without the risk of sabotage or unfair competition from individuals who were once aware of trade secrets. Again, this may vary from state to state, but there are several cases where a court may find that a non-disclosure agreement is unenforceable. Here are some examples of how this could happen: Properly managing the consequences of a privacy breach is not the ideal way for a company to invest its time and financial resources. At Peninsula Canada, our experienced HR, health and safety consultants can help you avoid these common and costly business mistakes. Call us today: 1 (888) 938-0468.
Suppose an employee or former employee violates the terms of a non-disclosure agreement. If the employer discovers this, they can apply for an injunction to prevent the employee from continuing to violate the NDA. An employer may also file a claim for financial damages for any loss related to the breach of confidentiality obligations. Companies often use confidentiality agreements for employees who work with valuable information about the company. If an employee violates a confidentiality agreement, it is almost guaranteed to end their employment relationship. Confidentiality agreements will always stipulate that the employer has the right to dismiss the employee responsible for a breach of the company`s sensitive information. Two years ago, in Waksdale v. Swegon North America Inc., 2020 ONCA 391, the Ontario Court of Appeal has established the correct method for determining whether a termination clause is enforceable. Applying the standard established in this case, the investigator must analyze the agreement as a whole and not on a piecemeal basis, and if a termination provision in the agreement violates the requirements of the Employment Standards Act, 2000 (ESA), all termination provisions of the contract will be considered unenforceable, regardless of the existence of a severability clause. which cannot be used to separate the disputed party from the termination provisions.
A confidentiality agreement, also known as a non-disclosure agreement, is a legally binding contract between two or more parties. As a general rule, these agreements are used when confidential information is exchanged between the parties. Confidentiality agreements are used to confirm the terms of the agreement and to ensure that the information disclosed is not misused. Depending on the circumstances of the breach of confidentiality and the extent to which it affected the company, the employer may even have a criminal complaint record against the employee. However, Canadian courts have held that to be enforceable, NDAs must meet the requirements of relevance and legitimate business interests, including time and specific restrictions. However, the lack of time limit was found to be enforceable. For example, in Evans v. Sports Corp., the Alberta Court of Queen`s Bench, ruled as follows: From the perspective of the receiving party, well-formulated non-disclosure agreements should: (a) address the consequences of a breach of confidentiality, which may vary depending on whether the breach was intentional, negligent or through no fault of the party to the offence; (b) expressly respect the disclosing party`s right to seek reasonable remedies by recognizing that a breach may cause irreparable harm that cannot reasonably be compensated by damages; and (c) contain compensation for any loss or damage (including claims of third parties) arising out of the breach. Non-disclosure agreements, or NDAs as they are sometimes called, are legally enforceable agreements between parties that are used to ensure that certain information remains confidential. And while NDAs are known by many names — including confidentiality agreements (CAs), confidential disclosure agreements (CDAs), and intellectual property agreements (IPAs) — they usually have one very important thing in common: once a person signs an NDA, they can`t discuss the information protected by the agreement with an unauthorized party.
Henderson v. Slavkin leaves no doubt that, when complying with the principle established in Waksdale, the courts will not limit themselves to determining whether an actual termination clause is unenforceable; You will review any provisions of an agreement or policy that provide that an employee`s failure to comply with those provisions would constitute grounds for termination without compensation. If a court finds that such a provision violates the ESA, it may strike down a termination clause that would otherwise be enforceable. Justice Goodman noted that the non-solicitation and confidentiality provisions of the employment contract were reasonable and ambiguous and did not limit Harriman`s “right or ability to continue to earn a living or operate as an insurance broker” or in sales generally. “In addition, the evidence presented by Stress-Crete, including [Harriman`s] emails and other statements, clearly and objectively shows the intention to do business,” the decision said. “The use of confidential information to facilitate solicitation is in itself a violation.” Therefore, employers are encouraged to carefully review all clauses in their agreements, plans, manuals and guidelines that provide that non-compliance by an employee with these clauses would constitute grounds for dismissal without compensation to ensure that they do not violate the ESA. As part of this audit, employers should seek the assistance of an experienced employment counsellor. The issue of confidentiality agreements and non-solicitation clauses was raised in the recent case of Stress-Crete Limited v. Harriman, published May 6. Stephen Harriman was an employee of Stress-Crete Limited and King Luminaire Company, Inc., an industrial lighting company headquartered in Burlington, Ontario. The issue was whether he had breached his non-compete obligation, his prohibition on solicitation and his confidentiality obligations under his employment contract. Harriman, sales manager for the northeastern U.S.
and Canada, resigned in October 2018 and accepted a point-of-sale offer at Cyclone Lighting, a direct competitor of Stress-Crete. If a person or company commits a breach of confidentiality, serious consequences can result. Below are some common findings about violating a confidentiality agreement. Companies typically enter into confidentiality agreements to protect private information, intellectual property, or business operations. In the event of a breach of agreement, the party responsible for the breach of contract must face not only legal action, but also other reputational issues, such as: while the rules can certainly vary from state to state, most jurisdictions consider non-disclosure agreements to be enforceable as long as they are properly designed and enforced.
